Sony Group Corp Earnings - Q4 2024 Analysis
Positives
- Sales increased by 12% YoY to ¥1,799 billion in FY 2024 due to the impact of forex and increased sales of mobile sensors.
- Operating income increased by 43% YoY to ¥414.8 billion, a new record for the segment due to increase in all categories except for first-party software.
- Operating income increased by 2% YoY to ¥190.9 billion, despite the impact of a sales decrease and additional restructuring charges in FY 2024 Q4, primarily due to operational expense reduction.
- Operating income increased by 35% YoY to ¥261.1 billion, due to favorable impact of forex, the benefit of increasing sales and improved manufacturing yields.
- Sales increased by 14% YoY to ¥1,842.6 billion, and operating income increased by 18% to ¥357.3 billion, a new record high for this segment.
Q&A Highlights - Q4 2024
Analyst asked about Sony's plans for producing animations and if there are any business targets related to this.
Hiroki Totoki, the company's CEO, explained that they are focusing on accelerating the project, with a top-down direction, and moving towards a bottom-up approach to produce different projects. He stated that the synergy of the entertainment businesses is only produced from the bottom-up approach, and that they are trying to set up the environment to facilitate this. He also mentioned that they have already produced over ten titles for TV programs, movies, and films, and that the pipeline is expected to be bigger.
Analyst asked about the impact of tariffs on Sony's hardware business and its portfolio.
Lin Tao, the company's CFO, explained that the ¥100 billion impact is based on the official tariff rate, and that they are taking measures to manage the impact, such as passing on the price and shipment allocation. Sadahiko Hayakawa, the company's VP, added that the ¥100 billion impact does not reflect the tariff reduction between China and the US.
Analyst asked about Sony's plans for promoting LBE (location-based entertainment) and expanding its IP.
Hiroki Totoki, the company's CEO, stated that they are still searching for different possibilities, but are doing a lot of attempts and not just in Japan, but also overseas. He mentioned that they are trying to use the license and LBE simulators as experimental tools, and that they are exploring collaboration with different partners. He also stated that they are trying to verify new business models and create new businesses, both inside and outside of Sony.
Analyst asked about the company's plans to spin off other segments, such as semiconductors and other businesses.
Hiroki Totoki, the company's CEO, responded that they have not considered spinning off other segments, but they are always looking at different options and evaluating the best course of action.
Analyst asked about the company's outlook on the market growth and overall outlook.
Hiroki Totoki, the company's CEO, responded that they are always thinking about investment and positioning in the market, and they have to consider the necessary investment and their capabilities. They are also updating the market trend and making adjustments in their strategy.
Analyst asked about the increase in monthly active users and how the company plans to continue increasing them going forward.
Hiroki Totoki, the company's CEO, deferred the question to Lin Tao, who explained that the increase in monthly active users is due to the transition from PS4 to PS5, with PS5 sales expected to continue increasing. He also mentioned that new users are driving the increase in MAU, and he has confidence that the trend will continue in the future.
Analyst asked about the company's plans for 2026 console sales, given the tariff and uncertain environment.
Lin Tao, the company's CFO, explained that the Q4 unit sales were as expected, with Q3 being the holiday season and including promotions and new titles. He also mentioned that the company is anticipating 50 million unit sales for the year, but with a flexible approach to shipment, given the tariffs and uncertain environment.
Analyst asked about the company's plans to improve profitability through operational efficiency.
Lin Tao, the new CEO of Sony Group Corp, explained that her top priority is to ensure the healthiness of financial performance and work together with Mr. Totoki to achieve his goals. She mentioned that Sony Pictures has a strong focus on creating synergy through leveraging the know-how of SIE and PlayStation Network. Additionally, she highlighted the changes in policy and management approach within SIE, where the focus has shifted from unit sales to engagement and MAU, leading to profitability. She also noted that the company is still halfway towards achieving financial discipline but sees an upside opportunity.
Analyst asked about the company's plans to improve profitability through operational efficiency.
Lin Tao, the new CEO of Sony Group Corp, explained that her top priority is to ensure the healthiness of financial performance and work together with Mr. Totoki to achieve his goals. She mentioned that Sony Pictures has a strong focus on creating synergy through leveraging the know-how of SIE and PlayStation Network. Additionally, she highlighted the changes in policy and management approach within SIE, where the focus has shifted from unit sales to engagement and MAU, leading to profitability. She also noted that the company is still halfway towards achieving financial discipline but sees an upside opportunity.
Analyst asked about the company's inventory in the US and how much has been consolidated.
The company has inventory in the US, but the exact amount has not been disclosed. The supply chain has been diversified, and the manufacturing process has been changed to include other countries.
Analyst asked about the manufacturing process review and the need for a new process.
The company is planning to introduce a new process that will require a higher precision sensor. The new process is not yet incorporated into the current MRP, but will be included in the next MRP. The company will update their MRP every three years, and will announce the details when they do so.
Analyst asked about the investment size and how it compares to the past.
The investment size is difficult to compare to the past, but the company is getting closer to the two MRPs before this one. The investment will depend on the demand and will be an optimal type of gradual investment.